Zombie Startups: How Losing a $1B Fintech Platform Inspired a Contrarian Bet on VC Failures | Krista Morgan, Founding Partner & CEO, Edited Capital

December 4, 2025

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What does it take to turn a “zombie” startup into a profitable business?

Krista Morgan built a fintech company that processed $1 billion in transactions and scaled to $10M in revenue. Then it collapsed in 90 days due to fraud. Instead of walking away, she turned that painful experience into a contrarian investment thesis: buying the "venture orphans" and "walking dead" companies that VCs leave behind.

As CEO of Edited Capital, Krista has completed 13 acquisitions of B2B SaaS companies stuck between can't raise and won't die. Her firm buys at 1x revenue multiples and transforms unprofitable venture-backed startups into sustainable, profitable businesses.

In this conversation, we explore her founder journey from London to Denver, the mechanics of her P2B Investor collapse, and the anti-power law playbook she uses to rescue zombie startups. We discuss why 75% of VC-backed startups fail, how to restructure companies in crisis, and what founders need to understand before taking venture capital.

Agenda:

  • Introduction:

    • Krista's contrarian thesis: buying venture orphans instead of chasing unicorns

    • What makes a company "walking dead"

  • Growing Up in Montreal:

    • Never planned to be an entrepreneur

    • Economics degree and first jobs in manufacturing

    • Moving to London for digital marketing

  • Learning Tech at London Agencies (2005-2006)

    • Working at big agencies when tech was being built

    • Pairing business strategy with technology

    • Realizing she wasn't good at being an employee

  • The P2B Investor Origin Story

    • Kitchen table moment: discovering peer-to-peer lending

    • Frustration with bank spreads and exchange fees

    • Father introduces accounts receivable financing concept

    • Combining P2P lending with factoring

  • Co-Founding with Her Dad

    • Moving from London to Denver in 2012

    • The difficulty of father-daughter co-founder dynamics

    • Why their relationship is better now post-company

  • Raising $18M Equity + $120M Debt

    • Fundraising as a reality for 7+ years

    • The three keys to successful fundraising

    • Putting yourself in investor shoes

    • Why fundraising is 75% preparation, 25% sales

  • Enterprise Sales Philosophy

    • Understanding what matters to your customer

    • Enterprise sales and fundraising are closely aligned

    • "Life is long and the world is small"

  • The Collapse: From $10M Revenue to Zero in 90 Days

    • Large concentrated account turned out to be fraudulent

    • Company went from solvent to insolvent overnight

    • Protecting the portfolio through restructuring

    • Working with lenders, investors, employees

  • How to Execute a 90-Day Restructuring

    • Having a turnaround mentor (who later became her partner)

    • Coordinating all stakeholders: lenders, VCs, employees

    • The importance of showing up with humility

    • Allowing people to be angry, then moving forward

  • What is Edited Capital?

    • Special situations tech buyouts

    • Helping venture-backed companies move off the venture path

    • Redefining success from growth-at-all-costs to profitable growth

  • Joining Stage Fund (Now Edited Capital) in 2020

    • Spring 2020: COVID hits, figuring out what's next

    • Realizing how much value was lost in her own sale

    • Hearing from other failed founders with valuable businesses

    • The core thesis: crisis as opportunity

  • Market Timing: 2020 vs. 2022

    • March 2020: thought companies would run out of money

    • Government stimulus created 2 years of record valuations

    • 2022-2023: thesis became mainstream as rates rose

    • Deal flow improved after building reputation

  • What Makes a Perfect Acquisition?

    • Right company, right price, right situation

    • Platform acquisitions: $4-12M revenue

    • Add-ons: $2M+ revenue for M&A growth strategy

    • M&A risk lower than organic growth risk in today's market

  • The 100-Day Playbook

    • Very hands-on, especially at the beginning

    • Changing culture, not just restructuring

    • Example: Salesforce for 11 opportunities vs. Google Sheet

    • Keeping the benefits VC money created, cutting the costs

  • Portfolio Performance

    • 13 acquisitions across 2 funds

    • 3 failures (had to shut down)

    • 1 exit (sold end of 2024)

    • 5 core platforms remaining

    • Favorites: Third Channel, Strongarm

  • On Venture Capital

    • Nothing fundamentally wrong with VC

    • Huge human advancement created by VC industry

    • But founders don't internalize the math

    • If you raise $25M, what exit do you need?

  • The Power Law Reality

    • Your chances of success are low by design

    • Be prepared for difficult conversations: down rounds, recaps

    • If you can't have those conversations, don't take VC money

  • Working with VCs During Restructuring

    • Most VCs are supportive of founders

    • They're never happy about the deal, but usually reasonable

    • Edited doesn't make everyone go to zero

    • Structuring deals that give everyone something they can live with

  • Founder Psychology: Optimism vs. Delusion

    • Founders are optimistic by definition

    • First conversation: why did you start this, why are you still excited?

    • Painting the picture: here's what it could look like

    • Making them want it before the pain

  • The Emotional Journey Matters More

    • 100% emotional journey is more important at the beginning

    • You have to make them excited before they're ready for pain

    • Like a gym membership: show them how good they'll feel

    On Failure and Recovery

    • Losing your company is like a breakup

    • You survive by putting one foot in front of the other

    • Took 2 years before enough space to process

    • "There's no way I'd be the person I am today without it"

  • Quick Fire Questions

    • Entrepreneurship in one word: Rewarding

    • Would you take VC again? Probably yes

    • Biggest myth: That it's lonely (the community is generous)



KEY TAKEAWAYS

  1. 75% of VC-backed startups fail - The power law is real, and founders need to internalize the math before taking venture money

  2. The Salesforce lesson - Venture-backed companies often have expensive tools they don't need. One company had Salesforce for 11 opportunities (a Google Sheet would work)

  3. Crisis creates opportunity - When companies are in distress, most investors see only trouble. Edited Capital sees value that hasn't been captured

  4. Restructuring is emotional first - Making founders excited about the future matters more than the logistics at the beginning

  5. The 90-day turnaround - With the right team and stakeholder coordination, you can go from crisis to sale in under 90 days

  6. M&A > Organic growth - In today's market, buying $1M of revenue is less risky than building it yourself

  7. Entrepreneurship isn't lonely - The founder community is generous and welcoming if you put yourself out there

Memorable Quotes

"I realized when I sold my company... that there was so much value capture that was just lost. I look at these businesses and think, 'Your business has a lot of value that didn't get captured.' That is the core of our thesis." — Krista Morgan

"You should invest in me not because it's all going to go perfectly, but because if it doesn't go perfectly, I'm going to tell you the truth and I'm going to handle it." — Krista Morgan

"For 11 opportunities, we could have a Google Sheet. I don't know that we really need Salesforce." — Krista Morgan


Links And Resources Mentioned

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